Covid: still plenty of known unknowns

As folk step out to enjoy their new-found freedom (and not just in NZ), it’s worth bearing in mind that we are still mired in uncertainty.  Indeed, the sense that the data is not good enough and governments are feeling their way as they go along, is perhaps even stronger now than it was a few weeks ago.

So a few high-level principles might help in thinking about the future.

Age (and infirmity) looks more and more the driver of Covid mortality

Or so says some of the better data, assessed in this paper by expatriate NZ economist Brian Williamson.

There are some sobering implications. He quotes the evidence of Professor Neil Ferguson to the UK’s Science and Technology Committee on the question of what proportion of those people who died from COVID-19 would have died shortly in any event?

“It might be as much as half to two-thirds of the deaths we’re seeing from COVID-19, because it’s affecting people who are either at the end of their lives or in poor health conditions. So I think these considerations are very valid.”

This data makes the case for policy measures based on age differentiation, and Williamson suggests governments will need to think very carefully in striking the right balance between compulsion and incentives (or as he puts it “a more nuanced incentive-based approach”).

There are signs that countries’ mortality experiences may be converging

The New York Times reports that the experience of some countries reporting differing Covid death rates looks more similar when examining the raw mortality data (i.e., the number of ‘excess deaths’ over the level one would normally expect at this time of year).

If this trend continues, we will probably place less weight on the specific public health measures implemented, and look more widely to explain the remaining differences in mortality, including perhaps luck in the timing of national outbreaks.

Should we be looking more at the convergence of countries’ responses to Covid, rather than their divergences?

Looking across the board at national responses to the pandemic (crucially this means the combined effect of government measures and the public’s voluntary behavioural choices), one is struck by the similarity: everywhere significant reductions in travel, workplace association and public socialising, particularly with strangers, and by the extent to which people are making pragmatic decisions based on their individual circumstances.

Before you ask: what about those photos of young Swedes sitting at cafe tables, take into account the fact that Swedish mobile telephone data suggests Easter travel in that country was 80 – 90% lower than usual.

If this pattern gets stronger, it will make it harder to sustain petty rules, micro-management and other manifestations of what might be termed lockdown socialism.

Adjustment is looming as the big question now – and here the potential for national divergences seems considerable

One reason this hasn’t been talked about quite so much is that it’s so very hard to see the big picture.

Full marks then to Economist Robert Barro writing for the National Review as he makes his case in the broadest and starkest terms.  He describes the current policy response as curbing economic activity in order to reduce the contagion’s spread. 

In his words: “I would characterize this policy as a decision to reduce U.S. and world GDP in the short run by roughly 20 percent. In essence, this is a voluntarily implemented negative supply shock, akin to a sudden loss in productivity.”

What, he asks, are reasonable monetary and fiscal responses to this fall in GDP? 

“The usual idea would be to consider forms of economic stimulus that raise aggregate demand and, therefore, offset the fall in GDP during a recession.”

But, as he points out: “… this reasoning does not apply here because we have already determined that a sharp, short-term reduction in GDP — for example, by 20 percent for a year — is a good idea.”

Let’s hope Barro is overestimating the 20% fall.   But his point remains valid: the public health measure is less travel, fewer restaurant meals, slower cancer treatments, fewer policemen.  Some of it will come from price increases, some from earnings reductions and some from government allocations.  If one person’s losses are made good from the exchequer, someone else has to carry that (perhaps in addition to his or her own).

Adjustment is needed to minimise and then reverse the GDP fall.  This process has already started and decisions – to facilitate or obstruct – are piling up for governments.  What restrictions will industries like transport and entertainment have to live with.  The sooner they know the quicker they can adapt and in ways that are bound to surprise us (might pubs turn into clubs for a restricted membership?).  And how long can governments continue paying unemployment benefit by labeling it as furlough?

 

 

 

 

 

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.